FAC Financial Analysis & Valuation 2

Question 1

Which cost element is classified as a 'direct cost' under FAR Part 31?

Accepted Answer

Cost of materials specifically purchased for a contract

Answer

Direct costs are those that can be identified specifically with a contract, such as materials purchased exclusively for that contract.

Question 2

In a should-cost analysis, the primary objective is to:

Accepted Answer

Determine what a contract should cost assuming efficient performance

Answer

Should-cost analysis evaluates contractor efficiency and economy to estimate what a contract should cost under efficient performance conditions.

Question 3

The Economic Price Adjustment (EPA) clause in a contract is primarily designed to:

Accepted Answer

Protect both parties from economic uncertainties over long performance periods

Answer

EPA clauses allocate the risk of economic changes (inflation, material cost fluctuations) between the government and contractor over extended contract periods.

Question 4

Under FAR 31.201-4, a cost is allocable to a government contract if it:

Accepted Answer

Benefits the contract, helps produce the contract's deliverable, or is necessary for overall operation

Answer

Allocability requires that a cost benefits the contract, is necessary to produce the contract deliverable, or is required for overall business operations supporting the contract.

Question 5

A contractor's forward pricing rate agreement (FPRA) is used to:

Accepted Answer

Pre-negotiate indirect cost rates for use in future contract pricing

Answer

An FPRA establishes agreed-upon indirect cost rates applicable to future contracts, reducing the need to negotiate rates on each new award.

(FAC) Federal Acquisition Certification Practice Test

(FAC) Federal Acquisition Certification Practice Test

FAC Financial Analysis & Valuation 2